Long Term Capital Gain on sale of Flat received as Gift

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This discussion clarifies the tax implications of selling a flat received as a gift. For long-term capital gains, the holding period and cost of acquisition are inherited from the previous owner. Since the flat was purchased before 2001, the cost of acquisition for indexation purposes will be its Fair Market Value (FMV) as of 01.04.2001, capped at the Stamp Duty Valuation (SDV) on that date. The base year for indexation is the financial year 2001-2002. While a valuation report can be helpful, the Stamp Duty Value as of 01.04.2001 can be used to determine the purchase price.

Sarika Agrawal

Sarika Agrawal (Querist)
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02 February 2021 My father had purchased a flat in 1975 for Rs. 50000. In the year 2017 he made a gift deed and transferred 50% share in my name. Now in the year 2021 we are planning to sell this flat.
Please let me know what would be the year of indexation and the purchase cost since it was purchased in the year 1975 much before the base year of 1981 and 2000 which are now considered as the base year for indexation.
Do we need to have any valuation report since it is an old property. Please guide.

Rahul varshney

Rahul varshney (Expert)
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02 February 2021 In your case, The transection will attract Long Term Capital Gain.
In case of gift, the period of holding and cost of acquisition will be treated as in the hand of previous owner.
Since the property was purchased before 2001, the cost of acquisition shall be the FMV as on 01.04.2001 (up to max the SDV as on 01.04.2001) according to your portion in the property.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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02 February 2021 * Base year of indexation is Financial year 2001-2002.
Inference :- (i) section 55(2)(b).
(ii) CIT Vs. Manjula J Shah 16 Taxman 42(Bom)

* Valuation report for the cost as on 01-04-2001 will help to substantiate the cost.

PS:- I have hoisted a writing regarding this in https://www.caclubindia.com/articles/cost-of-acquisition-of-a-capital-asset-acquired-u-s-49-1-ii-iii-a-of-the-income-tax-act-1961-17790.asp

Sarika Agrawal

Sarika Agrawal (Querist)
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03 February 2021 Thank you very much for your replies. I would like to know since the indexation year will be 2001 - 02 what would be the Purchase price (i.e. Rs. 1 lakh in 1975) be computed. Is it necessary to have a valuation report as on 01.04.2001 or is there any other means to work out the Purchase price as on 01.04.2001. Will the Stamp Duty Valuation as on 01.04.2001 be of any help. Please guide

Rahul varshney

Rahul varshney (Expert)
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03 February 2021 No need for a valuation report, you can go with the stamp duty value as on 01.04.2001.

Sarika Agrawal

Sarika Agrawal (Querist)
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05 February 2021 Thank you so much for your guidance and prompt replies.

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